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Italy votes to knuckle down ...

ROME: The Italian Parliament has given final approval to a package of austerity measures meant to cut the nation's budget deficit by ?70 billion ($93 billion) over three years.

ROME: The Italian Parliament has given final approval to a package of austerity measures meant to cut the nation's budget deficit by ?70 billion ($93 billion) over three years.

The lower house voted 316 to 284 for the plan, in what politicians called the fastest approval of a budget bill in modern Italian history.

The Prime Minister, Silvio Berlusconi, who won two confidence votes on the measures, had vowed to push the bill through because of worries in financial markets that Italy would become the next euro nation to suffer a sovereign debt crisis like those in Greece, Portugal and Ireland.

The bill was originally supposed to be debated later in the summer.

Italy's high debt and low growth have placed the country in an uncomfortable international spotlight. The rates the country had to pay to borrow rose this week to the highest levels in three years.

The Italian austerity package aims to eliminate the country's budget deficit by 2014. The deficit is now 4.6 per cent of gross domestic product, below the average for the euro zone.

The package includes ?40 billion in spending cuts. It also increases taxes, including those on petrol, and some trading accounts introduces a co-payment for some healthcare services raises the retirement age and cuts some high-level pensions.

The majority of the bill's provisions take effect in 2013 and 2014, after the government's term ends.

Meanwhile, Europe's banking system remains heavily dependent on government support and would be at risk if another economic downturn hit, the European Banking Authority has said in a report that highlights the lingering weakness in a financial system considered integral to a stronger global recovery.

In the latest stress test of 91 European institutions, the authority found a system that would be rocked by a mild recession and a spike in unemployment rates to levels some European nations already have been experiencing. While only eight of the 91 banks failed outright - another 16 barely passed.

The outcome led the banking authority, the International Monetary Fund, and other European officials to call on national regulators in European countries to make sure that banks improve their balance sheets, and soon.

The authority wants capital plans in place within three months. The 91 banks covered by the study represent the bulk of Europe's bank assets. "The risk outlook for European banks in general is a source of concern," said Andrea Enria, the authority chairman. "There is this lingering concern that we have not cleaned our house."

That feeling is likely to continue as analysts noted a tension between the study's generally positive headline findings, the text of the report, and the reality of present-day Europe.

The eight banks that failed, for example, were estimated to only need about $4 billion in additional capital, a relatively modest amount, and about the same as found in a previous stress test, conducted a year ago.

That test was discredited after several Irish banks failed despite passing the grade. However, the body of the latest report was more cautious.

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